REG-Polymetal International plc Polymetal: Business update and impact of sanctions

Polymetal International PKAnnouncement

09/03/2022 07:15

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   Polymetal International plc (POLY)
   Polymetal: Business update and impact of sanctions

   09-March-2022 / 10:00 MSK
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   Release IMMEDIATE                                                       
   time    LSE, MOEX, AIX: POLY / ADR: AUCOY
   Date    9 March 2022

    

    

   Polymetal International plc

   Business update and impact of sanctions

   Polymetal reports  that  all  its  operations  in  Russia  and  Kazakhstan
   continue undisrupted  and provides  an update  on the  impact of  economic
   sanctions and the most recent  changes in the capital control  legislation
   in Russia.

   The unfolding tragedy in Ukraine is horrifying and heartbreaking. We mourn
   the loss  of life,  and call  for  a lasting  peaceful resolution  of  the
   conflict. Our thoughts and prayers are with those who have been affected.

   At the time of writing, the Group states that:

   Operations

     • Polymetal operations in Russia and Kazakhstan continue undisrupted.
     • In 2021, Kazakhstan operations generated  43% of the Group's  Adjusted
       EBITDA and 48%  of its net  earnings. Kazakhstan operations  represent
       40% (12 Moz) of Polymetal's gold equivalent reserves.
     • Group's scope of operational activities and production guidance remain
       stable.  The Company  is reviewing non-essential  capital projects  in
       order  to  preserve  liquidity  and  minimize  risk.  The   management
       specifically notes  that POX-2,  Urals Flotation,  Kutyn, and  Prognoz
       projects are not subject to  review and their execution will  continue
       as previously planned. 

   Sale of bullion/concentrate

     • Sales of bullion and concentrate from Kazakhstan continue as usual.
     • In Russia, Polymetal sells silver concentrate from Dukat (sold  mainly
       to Kazakhstan as well  as East Asia)  and refractory gold  concentrate
       from Mayskoye and Nezhda (sold  to China and Kazakhstan). The  Company
       received  assurances  from  off-takers  that  all  existing  contracts
       continue in good standing. 
     • Sales of bullion in Russia have been impacted by sanctions imposed  by
       the US, EU and UK. The Company fully adjusted sales to comply with all
       relevant sanctions.
     • Domestic physical demand for gold in Russia has been supported by  the
       decision of the Russian Central Bank  to resume gold purchases in  the
       domestic market. According  to CBR  statement, the  purchases will  be
       conducted at LBMA  price of  the day  of the purchase. The Company  is
       also working  on expanding  the number  of counterparties  for  export
       bullion sales.

   Inventories & supplies

     • Polymetal  routinely  carries   at  least  three   months'  worth   of
       consumption in stockpiles of critical materials, consumables and spare
       parts. Insurance stock levels further increased since the start of the
       COVID-19 pandemic in 2020.  This extra inventory will provide a safety
       buffer in case  of unforeseen  supply chain  disruptions. The  Company
       initiated a  review  of  logistics  and procurement  with  an  aim  to
       increase the supply  chain resilience and  potentially shift  critical
       supplies  to   domestic   or  Chinese-manufactured   consumables   and
       equipment.

   Liquidity & net debt

     • Net debt  increased to  US$ 1.87 billion as  of 1  March (31  December
       2021: US$  1.65 billion)  mainly driven  by seasonal  working  capital
       increase. 96% of the total debt is denominated in US dollars.
     • Central Bank  of Russia  raised its  key interest  rate to  20%  (from
       9.5%) on February 28th. The average cost of debt as of March  remained
       low at approx. 2.9%. However, the management expects a sharp  increase
       in interest rates  for new borrowings  denominated in Russian  roubles
       and in foreign currencies to affect the Company's average cost of debt
       for 2022. 27% of the Group's debt matures within the next 12 months.
     • The Group  has  approx.  US$  0.4 bn  in  cash  and  cash  equivalents
       deposited  with  non-sanctioned   financial  institutions.  With   the
       significant free  cash  flows  coming from  the  Company's  Kazakhstan
       operations, Polymetal has  enough buffer  to continue  to fulfill  its
       obligations and capital commitments in the next 12 months even in  the
       absence of new borrowings.  In addition, the  Company maintains US$  1
       billion  of  undrawn  credit   lines  from  non-sanctioned   financial
       institutions. We will provide further updates on the Group's liquidity
       position in due course.

   Dividends

     • The Company currently intends to pay the final dividend as proposed by
       the Board on March 2, 2022.  At  the same time, the Board retains  the
       discretion to  re-evaluate its  dividend recommendation  prior to  the
       Annual General Meeting with a view to ensuring liquidity and  solvency
       of the business.

   Capital controls

     • From 1  March 2022,  certain foreign  currency transactions  involving
       Russian residents are restricted.
     • Russian legal  entities are  prohibited to  pay dividends  to  foreign
       persons, although formally these instructions apply only to  dividends
       of joint-stock companies paid through professional participants of the
       securities market. It is currently unclear whether the Company will be
       able to remit dividends from  its Russian subsidiaries to the  holding
       company level.
     • Russian residents are obliged to sell 80% of foreign currency received
       under export contracts with non-residents on the transfer of goods  or
       services. The purchases are  going to be made  at the Central Bank  of
       Russia's rate.
     • These new regulations are  currently not expected  to have a  material
       impact on the Company  other than the  impact on intragroup  dividends
       described above.

   Board

     • Six independent Board members, including  the Chairman and the  Senior
       Independent Director,  resigned  from  the Board  effective  7  March.
       Polymetal Board commenced a search  for new independent directors  and
       intends to maintain full compliance with the UK Governance Code.

   The Group  complies  rigorously  with  all  relevant  legislation  and  is
   implementing   comprehensive   measures   to   observe   all    applicable
   international sanctions.  The  scope  and  impact  of  any  new  potential
   sanctions (and any countersanctions) are yet unknown.  However, they might
   further affect  key  Russian  financial institutions  as  well  as  mining
   companies. Polymetal  believes  that  targeted sanctions  on  the  company
   remain unlikely, but  are not  impossible. Contingency  planning has  been
   initiated proactively to maintain business continuity.

   Further updates will be provided in due course.

   Enquiries

       Investor Relations
   Polymetal         1 ir@polymetalinternational.com

   Evgeny Monakhov  +44 20 7887 1475 (UK)

   Timofey Kulakov   

   Kirill Kuznetsov +7 812 334 3666 (Russia)

   Forward-looking statements

   DUE TO THE  RECENT MASSIVE DDOS  ATTACKS, OUR WEBSITE  MAY BE  TEMPORARILY
   UNAVAILABLE, THOUGH WE WILL CONTINUE  DISTRIBUTION AND PUBLISHING ALL  OUR
   ANNOUNCEMENTS THERE. THEY WILL BE FULLY AVAILABLE WHEN THE SITE RETURNS TO
   NORMAL OPERATION.

   This release may  include statements  that are, or  may be  deemed to  be,
   "forward-looking statements". These forward-looking statements speak  only
   as at the date  of this release. These  forward-looking statements can  be
   identified by the use of forward-looking terminology, including the  words
   "targets",  "believes",  "expects",  "aims",  "intends",  "will",   "may",
   "anticipates", "would", "could" or "should" or similar expressions or,  in
   each  case  their  negative  or  other  variations  or  by  discussion  of
   strategies, plans, objectives, goals,  future events or intentions.  These
   forward-looking statements  all include  matters that  are not  historical
   facts. By their nature, such forward-looking statements involve known  and
   unknown risks,  uncertainties  and  other  important  factors  beyond  the
   company's control  that could  cause the  actual results,  performance  or
   achievements of  the  company  to  be  materially  different  from  future
   results,  performance  or  achievements  expressed  or  implied  by   such
   forward-looking statements. Such forward-looking  statements are based  on
   numerous assumptions regarding the  company's present and future  business
   strategies and the environment  in which the company  will operate in  the
   future.  Forward-looking   statements  are   not  guarantees   of   future
   performance. There are many factors that could cause the company's  actual
   results, performance  or  achievements  to differ  materially  from  those
   expressed  in  such  forward-looking  statements.  The  company  expressly
   disclaims any  obligation or  undertaking to  disseminate any  updates  or
   revisions to any  forward-looking statements contained  herein to  reflect
   any change in the company's expectations with regard thereto or any change
   in events, conditions or  circumstances on which  any such statements  are
   based.

    

    

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   ISIN:           JE00B6T5S470
   Category Code:  MSCM
   TIDM:           POLY
   LEI Code:       213800JKJ5HJWYS4GR61
   OAM Categories: 3.1. Additional regulated information required to be
                   disclosed under the laws of a Member State
   Sequence No.:   147745
   EQS News ID:    1297769


    
   End of Announcement EQS News Service

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References

   Visible links
   1. mailto:ir@polymetalinternational.com


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